Suburbs “Secede” from Atlanta

 Suburbs Secede From Atlanta

I heard about this story the other day and figured I’d post it because it’s a microcosm of where I see things going and in a way it’s kind of hopeful because it shows that you don’t always have to sink the ship/leave with the girl you came to the dance with, etc.

The TL;DR version:   The city of Atlanta has a lot of problems ranging from the omnipresent municipal debt problems, corruption and the real possibility of the public school system losing accreditation.   I’ve never heard of that happening before to a public school system, so that has to be bad.   Bucking the trend against larger cities incorporating smaller ones, many communities within the Atlanta area have begun to incorporate themselves as new cities in order to get away from Atlanta’s problems and have apparently been successful so far.   Oh, and there’s been a handful of accusations of racism for good measure.

An anonymous “key leader” in the black community (side note: who knows what this actually means.  Could be a city councilman with a bit of pull or it could be some random self-aggrandizing asshole with no pull)  who wants to file a lawsuit against the new cities made the following statement:

“So when you allow powerful groups of citizens to opt out of a social contract, and form their own, it may benefit the group opting out, but it hurts the larger collective,”

It’s also mentioned that the Georgia Legislative Black Caucus was upset over this and tried to bring the cities back into Atlanta’s orbit via a lawsuit in 2011 because the “super-white” cities diluted the voting power of black voters in Atlanta.   To me it seems like it would be just the opposite but what do I know, I’ve never been voted into office.
So the municipal government and some “city leaders” are pissed off because some of the city’s more affluent former residents aren’t happy with being forced to pay for mismanagement that they (largely) didn’t ask for as well as being politically subordinate to a voting bloc that as the GLBC suggests doesn’t vote in their interests.      Now there’s a lot of crying and yelling “they can’t do that!” even though they just did.
I really hope to see more of this throughout the country.   This allows people who feel they’re being mistreated to take greater control over their affairs and it forces the people doing the mistreating to cope without the people they’re mistreating.   We’ve had “bigger is better” engrained into us over the past few generations and maybe that’s not the case when it comes to these things.   Being a handful of different cities doesn’t mean that the people in the suburbs can’t work, shop or entertain themselves in Atlanta and vise-versa.   All it means is that everyone gets a little more responsive local government.
Sure it sucks for the people of Atlanta, but you have to draw the line somewhere.

 

Detroit: Too Big To NOT Fail

Detroit: Skid Row

I doubt anyone is surprised to hear that Detroit is in deep shit right now.    That’s been common knowledge for quite some time now, despite the perennial “Detroit is experiencing a renaissance” articles in the media.   To be fair, occasionally I do hear about some good things happening in Detroit at the neighborhood level from time to time, especially in the way of urban farming and restoring abandoned buildings.

So basically what’s happening now is that they’re finally acknowledging that the situation in Detroit is out of hand.   The city has about $14 billion in unfunded liabilities (pensions, health care benefits, etc) and about $2.3 – $2.6 billion in annual revenues, which doesn’t cover their current expenses, let alone the debts and liabilities.    It looks like the state is going to step in and suspend the powers of the Detroit City Council and the Mayor in order to try to get things straightened out.    Detroit as we know it today is a failed city.   It’s a tough pill to swallow that these kinds of places exist in the omnipotent United States of America, but that’s reality.

State of Michigan Debt Clock

The rest of Michigan isn’t doing so hot, but I assume that a lot of the state is doing better than Detroit and Flint.   The state is about 125 million in debt, representing a little over $12,000 per resident.    This article from The Economist points out that this move is going to make a lot of people angry – there’s a big cultural and political divide between Detroit and the rest of Michigan and I’m sure the anger is going to go in all different directions over this.    People from Detroit (who tend to be black and democrat) aren’t going to like the state government (currently republican) calling the shots ethe rest of the state (which is mostly white and a little more conservative-leaning) isn’t going to be thrilled with bailing Detroit out while things are tight for them as well.

In The 2012 Election and the Elephant Outside The Room I mentioned that in a short period of time I think there will be some real talk of states wanting to split up one way or another.    Detroit and Michigan might be the most likely candidate at this point, although Northern California has been whispering about parting ways with Southern California for years.

It will be interesting to see what happens with Detroit in the next few years as there probably won’t be able to pull off any magic tricks and fix Detroit’s problems.   There are some different dynamics at play, but when the subject of municipal and state debts come up, it’s often pointed out that many of the states that are in trouble right now have economies the size of European countries.    Michigan’s economy is bigger than that of Greece.   If a major city goes down and brings the state down with them, what happens then?   We don’t know, but I’m sure we’ll see in the next few years.

I’ve never even been to Detroit, so I feel kind of silly saying what’s best for Detroit, but it really sounds like Detroit’s future isn’t in “Detroit”, but rather in a series of smaller communities.   By all reports a good portion of the city is already vacant.   If you go to yahoo or google maps and look at Detroit, there’s a lot of open spaces in the residential areas of Detroit’s inner city.       When/if the city government fails, it makes sense for communities within Detroit to pick up the pieces and go at it without them.   Honestly, it would be difficult to run a municipality any worse than Detroit’s leadership already has.   That’s probably the best way to get out from underneath the unsustainable debt of that city.

Whenever I come across articles about Detroit, I always read them.   It kind of fascinates me.   It sounds like everything is already in place to start devolving into a series of smaller communities already.   Occasionally you read about “urban pioneers” from the suburbs revitalizing one little pocket of the city, an ethnic group establishing a viable section of the city or a small inner-city area getting together and cleaning house.   Everyone might be better off starting from scratch instead of trying to keep the whole shit-show going.   Nothing lasts forever, especially municipalities.

It is cool to see examples of dilapidated buildings getting restored or communities within Detroit find some reason to wake up in the morning.   As I understand it, in the 50’s Detroit was basically America’s model city with a very prosperous middle class, a ton of cultural amenities, great architecture and so forth.   Returning to those days probably isn’t in the cards, but it is possible to create vibrant communities within that patch of land.

People that like history usually have a few events or periods that they’re really into.   One of mine is the fall of Constantinople.   Reading about Constantinople before the Turkish siege sounds a lot like Detroit – most of the prosperity was gone one way or another, they were deeply in debt, crime and depravity ran wild and large tracts of the once-great city reverted into farm plots, vineyards, orchards and open space.   The city had the feeling of a series of small villages instead of one grand city.   When the Ottoman Sultan Mehmet II finally made it past Constantinople’s gates he was a little let down with what he actually saw in the city as it was a far cry from it’s glorious legacy.

At any rate, I’ll continue to watch the news from Detroit.   The city’s plight is nothing new, but at some point they’re going to hit a breaking point (or magically solve their problems) and there could be greater implications for the rest of the country when/if that happens.

 

How Much Is A Firefighter Worth?

How Much Is A Firefighter Worth?

 

 

A couple months ago I decided that I was going to cut down the amount of financial programs I listen to.   I admitted to myself that I was spending a lot of time being told about how bad things are, how the system is rigged and how there’s a looming catastrophe just around the corner.  I get it.   I’m already taking measures to deal with the possibility of going through some hard times.   I’ve been putting that podcast time towards other things I want to learn about.   There’s only two financial podcasts I listen to regularly.   One is Follow The Money Weekly.   I think this one is good because it’s more proactive than reactive and I learn a lot from it.   The other one is NPR’s Planet Money.  Planet Money is cool just because it’s almost always really interesting and informative.   It’s the kind of show that after it’s over you can turn to whoever is next to you and talk about what you just heard.    The link is to a Planet Money podcast that I heard a few weeks ago.

Here’s the condensed version of the story:  A long time ago the city  on Contra Costa, California made promises to the firefighters that they would receive a set percentage of their final pay as their pension.   When they made that deal the city assumed that their tax revunes were going to keep going up and up and they would be able to foot the bill for not only the current fire department, but the retirees as well.   That growth that they counted on didn’t happen and the city is stuck with a huge bill for fire services and pensions.

Some in the city are claiming that that since the majority of calls the firefighters go out on are of a medical nature instead of fires, they can get away with a lot less.   One commenter in the blog (who says he is a firefighter) points out that the increase in medical calls reflects a growing dependence on emergency medical services as primary care among the poor/uninsured and not necessarily a decrease in fires.    The commenter also brings up the fact that when a fire does happen, everyone is going to want the right amount of firefighters on hand and cuts in staff can make it difficult for the firefighters to do their primary job.

After a lot of talk between the city and the union, they came up with the idea of putting out a ballot measure for a $75 across the board tax increase to help fund the firefighter’s pension fund.   They needed a 2/3 vote and ended up short of that, so the measure didn’t pass.   Now they have to make some very deep cuts in fire service in order to make up the shortfall.

While this is the story of just one American town, I think it reflects a few themes and growing trends:

–  We tend to count our chickens way before they hatch and probably assume that one of those chickens is going to lay a few golden eggs.    I think the idea that everything is just going to keep going up and up is too deeply engrained into our financial workings.  Unfortunately reality is something completely different and assuming that the future is going to be like the past can be dangerous.

–   As a society we want more things than we’re willing to pay for.   That’s understandable – who doesn’t want more than what they pay for?   I always like to get a good deal on things.   I like the idea of putting a tangible amount to the measure and putting it out to the public on what things actually cost per household.   I would love to see a website that had goverment expenditures on everything broken down to per capita, i.e. “we spend X amount per person on foreign aid to Djibouti and Y on the military presence in Korea”.   It’s easy for us as citizens to say “they should do this” and “they should do that” when we’re not directly seeing the bill but if we actually saw the costs I think the conversation on a lot of things would be a lot different.   By putting out the costs you’re not exactly making judgments on whether or not it’s a good deal, but you’re letting the taxpayers theoretically decide whether or not they think it’s a worthwhile expenditure.    The elephant in the room on that subject is that a lot of those expenditures get passed on to future generations through government debt.    At any rate, I think most people are really disconnected from what things actually cost.  I think sometimes people think that these decisions to cut services are made just because someone has a spiteful heart and wants to make their life miserable rather than fiscal reality.

–  To use another colloquialism, a lot of our financial system really seems like a giant game of hot potato.  Just keep passing it on.   Eventually it’s going to get too hot for someone to hold.   The US government can always print money, cities can issue bonds and raise taxes, but someone has to be willing to buy those bonds and raising taxes could chase away people who would otherwise pay in.   Das FedGov can unload every bond they issue to the Federal Reserve.      I went a little deeper into this subject (and some of America’s muncipal/state debt woes) in this article:   Scranton Mayor Slashes Pay For All City Employees to Mininum Wage – Austerity Comes To America

–   Unfortunately it’s easy for politicians to make deals that they won’t be around to take the heat for.     This kind of ties into the “people want more than they’re willing to pay for” idea.    Sometimes tough decisions don’t make good material for reelection campaigns.

–  I think we’ll be seeing more of this in the years to come as local governments are going to have to keep making cuts in order to stay afloat.   People aren’t going to like it, either.    At the end of the day, there’s usually only so much money coming in and only so much you can do with it so difficult decisions will have to be made.   When a city gets over the head in debt, they’ll go to the county.  When a county gets in over their head, they’ll go to the state.  When the state is over their head, they’ll go to the federal government.   The economies of many US states are quite large (especially California and Illinois – two states in a lot of trouble) so a state going under will probably have a big effect on international scene, just like Greece has been.     People around the country and within states aren’t going to be happy about bailing out other cities/states.    Should be an interesting ride…

 

 

 

 

Scranton Mayor Slashes Pay For All City Employees to Minimum Wage – Austerity Comes to America

Scranton mayor slashes pay for all city workers—including police and firefighters—to minimum wage

 

This is a story that came out today on Yahoo about the city of Scranton, PA taking drastic measures to deal with their budget crisis.   The article describes how the mayor slashed everyone’s pay down to minimum wage, perhaps illegally, in order to keep the town something resembling solvent.   According to the article, Scranton has a $16.8 million budget deficit with only  $133,000 in cash on hand and $3.4 million in vendor bills (i.e. health insurance and such).

I feel for the city employees – building your life around getting a decent paycheck every week and then suddenly being expected to do the same amount of work for a poverty level paycheck has to be a real kick to the teeth.   I’m sure everyone thinks the mayor is an asshole too, but I know that was not an easy call to make.  The bottom line is that there’s essentially no money, not enough revenue coming in and someone is going to have to swallow it.

Scranton isn’t the only city in the US facing these problems by any means, but as far as I know it’s the only one of any notable size that has taken these kinds of drastic measures in the midst of a budget crisis to date.   There have been many municipal layoffs, cutbacks, reduced hours and overtime and wage freezes, but I can’t recall hearing of an across-the-board wage cutting like this.

The thing that really scares me about this news story is that Scranton’s situation isn’t unique and many other city, county and state governments around the country are in equally dire straits.     So who is going to come to the rescue?   The county that Scranton is in is probably broke too.    Scranton isn’t the only city in Pennsylvania facing hard times and if the state comes to the rescue, they’ll probably have to step in for the other cities facing a budget crisis.   If other cities in Pennsylvania are facing budget crises, the state as a whole is probably behind the 8 ball as well and would have to look to the federal government for assistance.   If the federal government helps out Pennsylvania, they’re going to have to help out Michigan, New York, Illinois, California and every other state facing a local crisis.   In case you haven’t heard, the federal government isn’t looking so hot either right now in this department.  I fear that right now we could be at the verge of a major economic disaster that will start from the lowest levels of government and work all the way up to the top.

The difference between the federal government and state and local governments is that the federal government can print money to meet its obligations.  Local governments have to raise taxes, attract new sources of tax revenue or issue bonds if revenue falls short.   Since the economy tanking and the housing crash, there’s been less money for local governments to take.   An increase in foreclosures and lower property values mean lower property tax revenues.   They can raise taxes, but many people and businesses (especially the successful ones with more to lose) may move to greener pastures, having an overall negative effect on revenue.   You can issue bonds, but people have to want to take the risk and buy them.  If they don’t, you have to raise the interest in order to attract the investors.   At some point, the city is responsible for paying back the bondholders more than they borrowed and there’s no guarantee that things will be rosy and the money will be flowing in the future.    In other words, the federal government has more tricks up their sleeve to deal with budget shortfalls than local governments.

This will undoubtedly mean a sharp decline in services for the people of Scranton and the people of any other municipality facing a similar dilemma.  Many cities are laying off police officers and at least in theory Scranton is keeping the same amount of officers on hand, but it’s likely that police officers will seek new lines of work, jobs with different departments and become more cynical about their work.   I think most police officers have a genuine desire to keep the citizens of their city safe and fight crime, but I can see a police officer who just had his wage cut by more than half becoming apathetic to petty crime.   So someone broke into your garage and stole some tools?  Yeah, sure, they’ll get right on it.   When criminals know they have a better chance of getting away with crime, they’ll do it.  When committing petty crimes becomes less risky, more marginal people will get knocked off the fence and crime will become more alluring.

We can debate whether or not this is the smartest solution, but ultimately it looks like we can expect to see more of this throughout the country and there’s probably not anyone coming on a white horse to save some of these cities.

Ok, now let’s talk about how to deal with this situation:

–  Since the quality of policing will likely go down, it’s a good idea to take home security precautions like good lighting, good locks, cutting back shrubbery that could give criminals a place to hide, securing easily accessible windows and making it look like you’re home when you’re not just to name a few general ones.

– Being armed and knowing what you’re doing to include lethal and non-lethal weapons.  If someone’s coming in and the cops can’t be there in the next 10 seconds to save your ass, it’s in your best interest to do it yourself.   Know and abide by your local laws on this subject as well.

–  It pays to be in as good of health as possible if facilities and ambulance services have declined.   Actually, it pays to be in good health even if they could beam you up into the finest hospital in the world at the drop of a dime.  Learn basic first aid (or even more advanced!), it might come in handy someday while you’re waiting for an ambulance.

–  Know your neighbors and look out for each other.   Although the neighborhood watch concept may have taken a bit of a hit with the recent Zimmerman/Martin incident, it’s a good idea to be vigilant and look out for your neighbors and have them do the same for you.

– If you’re someplace really precarious, you can always jump ship and go somewhere else.   It would probably be easier to sell your home sooner rather than later if the municipal debt crisis kicks off.  Some parts of the country (and probably even within your state or county) are better off than others.

–  If you think your job, wage and benefits are secure, so did the employees of the city of Scranton.   A legal agreement can bind one party to pay another, but a legal agreement can’t magically fill the payer’s pocket full of money for the payee.   The employees can take the city to court, but if there’s no money there still going to end up with bloodless turnip for dinner that night.

I’d like to believe that this is just a fluke and a temporary glitch, but I think we’re all going to have to start making due with less.   Hopefully the employees of the city of Scranton were able to prepare themselves financially for this kind of situation and hopefully some sort of normalcy is reached soon.